Oil Prices Remain Low as Fed Tapers Stimulus

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Recently, the Energy Information Administration released its weekly reports on the status of various liquid fuels in the United States, covering the week that ended December 13. The reports cover natural gas and petroleum, presenting data about the production, storage, and prices of the fuels. Changes in the data can reflect natural variations, seasonal trends, long-term market effects, and current events in regions of the globe where liquid fuels are produced, processed, and sold. This week was highlighted by anticipation of the Federal Reserve beginning to taper quantitative easing, which will start to wind down this month.

Working natural gas in storage — the volume readily available to the market — decreased by 285 billion cubic feet in the week ended December 13 to 3,248 Bcf, according to EIA estimates. This is down by 488 Bcf from the same period last year, but at the upper-end of the five-year historical range.¬†As of Thursday, futures traded at $4.251/mmBTU, up significantly in the past few months and starting to enter the $4 to $6 range within which producers can both earn a profit remain and compete with alternative fuels such as coal.

The data show a trend has developed over the past few years. Inventories have been on the rise as domestic production increases, largely thanks to advances in horizontal drilling and hydraulic fracturing technology. These advances have contributed to a revolution in energy production in the U.S. and producers are rapidly helping make the dream of energy independence come true. Domestic production supplied the U.S. with 84 percent of its total energy needs in 2012, the highest level since 1991. The EIA estimates that the U.S. could become a net exporter of natural gas as early as 2020, assuming regulatory hurdles can be overcome.

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